Migration and Labour Choice Migration and Labour Choice in Albaniain Albania

Carlo Azzarri, World Bank Carlo Azzarri, World Bank Gero Carletto, World BankGero Carletto, World Bank

Benjamin Davis, FAOBenjamin Davis, FAOAlberto Zezza, FAOAlberto Zezza, FAO

ABCDE, Tirana, June 10-11, 2008ABCDE, Tirana, June 10-11, 2008

OutlineOutline

ObjectivesObjectives Income structure in AlbaniaIncome structure in Albania Education, land and migrationEducation, land and migration ModelsModels ResultsResults Conclusions and policy implicationsConclusions and policy implications

ObjectivesObjectives

How does migration affect labor How does migration affect labor market participation and market participation and occupational choice?occupational choice?

Is there a “gender issue”?Is there a “gender issue”?

Labor disincentive: wait for men and Labor disincentive: wait for men and income for women?income for women?

Household income structureHousehold income structure

in percentages obs. Farm Wages Self-emp. Remit.Public Transf. Farm Wages Self-emp. Remit.

Public Transf.

Poverty rate

All 3,599 0.29 0.31 0.10 0.10 0.20 0.62 0.45 0.15 0.28 0.57 0.25

REGION (unw)tirana 600 0.01 0.58 0.12 0.07 0.23 0.09 0.70 0.15 0.16 0.54 0.18coast urban 480 0.06 0.45 0.14 0.12 0.23 0.36 0.62 0.20 0.35 0.53 0.20coast rural 520 0.49 0.20 0.05 0.12 0.14 0.91 0.31 0.10 0.30 0.49 0.21central urban 479 0.04 0.39 0.16 0.10 0.31 0.16 0.58 0.23 0.32 0.64 0.19central rural 520 0.48 0.18 0.08 0.11 0.15 0.98 0.30 0.13 0.31 0.57 0.29mountain urban 400 0.04 0.51 0.10 0.06 0.29 0.21 0.64 0.13 0.12 0.55 0.25mountain rural 600 0.56 0.16 0.02 0.06 0.20 0.99 0.28 0.03 0.15 0.74 0.50Source : own calculations, 2002 ALSMS

Participation in economic activities, sharesSources of income, percentages

Household income structure Household income structure …cont’d…cont’d Bottom quintile

27%

5%

22%

8%

38%

Wages

Self-employment

Top quintile

19%20%

32%

13%

16%

Farm income Remittances

Public Transfers

0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80

Farm income

Wages

Self-employment

Remittances

Public Transfers

Top quintile

Bottom quintile

Characterizing migrationCharacterizing migration

in percentagesobs. (unw.) Greece

Italy & beyond Greece

Italy & beyond

ALL 3,599 13 20 13 5

QUINTILES 1 720 9 11 16 42 720 11 16 17 43 720 13 19 13 44 720 15 26 10 65 719 19 27 9 7

REGIONS tirana 600 6 23 5 3coast urban 480 10 25 8 7coast rural 520 17 25 13 7central urban 479 15 20 10 6central rural 520 17 17 20 3mountain urban 400 6 14 11 5mountain rural 600 12 8 19 6

Source : own calculations, 2002 ALSMS

Permanent Temporary

Access to international migration (% of HHS)

Characterizing Characterizing migration ...cont’dmigration ...cont’d

600-800,000 International migrants 1990-600-800,000 International migrants 1990-20022002

Private transfers are widespreadPrivate transfers are widespread Underestimation of migration and Underestimation of migration and

remittances sizeremittances size Migrants:Migrants: -from Coastal and Central Areas -from Coastal and Central Areas

-from poor families-from poor families Temporary vs permanent migrationTemporary vs permanent migration Greece vs further destinationsGreece vs further destinations

Education, land, and Education, land, and migration assetsmigration assets

Hypotheses:Hypotheses:

Education as main determinant of labor Education as main determinant of labor participation participation

+ education > white collar, off-farm + education > white collar, off-farm

+ land > on-farm job, but U-shaped+ land > on-farm job, but U-shaped

Migration: more investment and labour to Migration: more investment and labour to self-employment and agriculture, but self-employment and agriculture, but possible moral hazard problempossible moral hazard problem

Results – Participation Results – Participation ProbitProbit

EducationEducation: : positive and increasing for positive and increasing for femalefemaleAgricultural land: positive for M&F, with Agricultural land: positive for M&F, with decreasing marginal returnsdecreasing marginal returns Relative deprivation: positiveRelative deprivation: positive District level unemployment: lower District level unemployment: lower participationparticipationOwn temp migration: strongly negative for Own temp migration: strongly negative for menmenMig. to Italy: disincentive effect for women Mig. to Italy: disincentive effect for women (via remittances?)(via remittances?)

Results – Occupational Results – Occupational choice (MNL)/1choice (MNL)/1

Women are least likely to participate in Women are least likely to participate in self employment activities, followed by self employment activities, followed by wage employment, then on-farm labour.wage employment, then on-farm labour. More children>higher likelihood of More children>higher likelihood of working in agriculture as opposed to wage working in agriculture as opposed to wage work for menwork for men Married men are more likely to be Married men are more likely to be salaried workers than farmerssalaried workers than farmers Married women tend to ‘get stuck’ on Married women tend to ‘get stuck’ on farm and are less likely to be engaged in farm and are less likely to be engaged in wage employmentwage employment Education pulls women out of farming and Education pulls women out of farming and into wage employmentinto wage employment

Results – Occupational Results – Occupational choice (MNL) /2choice (MNL) /2

Agricultural assets: more on-farm, though Agricultural assets: more on-farm, though this decreases with land size (reverse this decreases with land size (reverse effect is found for land and age for effect is found for land and age for females)females)

Individual temporary migration: more Individual temporary migration: more self-employment -particularly for younger self-employment -particularly for younger individuals. individuals.

For women, previous migration For women, previous migration experience leads to a higher likelihood of experience leads to a higher likelihood of working in wage labour working in wage labour

Permanent migration to Italy reduces the Permanent migration to Italy reduces the relative probability of being self-relative probability of being self-employed, and this effect increases with employed, and this effect increases with age. age.

MNL -Predicted MNL -Predicted probabilities-probabilities-

0.2

.4.6

Pro

babi

lity

0 5 10 15 20years of education

Male Female

On-farm

0.2

5.5

.75

1P

roba

bilit

y

0 5 10 15 20years of education

Male Female

Wage

0.0

5.1

.15

.2P

roba

bilit

y

0 5 10 15 20years of education

Male Female

Self-employment

ConclusionsConclusions

Farming is still the main livelihood of Farming is still the main livelihood of many Albanian households, heavily many Albanian households, heavily dependent on low-productivity dependent on low-productivity agriculture.agriculture.

Diversified income strategies.Diversified income strategies. Migration is used as a mechanism to Migration is used as a mechanism to

diversify economic activities to cope diversify economic activities to cope against risk and obtain liquidity and against risk and obtain liquidity and capital under credit and insurance capital under credit and insurance market failures. market failures.

Conclusions ...cont’dConclusions ...cont’d Access to household and individual level assets Access to household and individual level assets

affects individual labour participation and affects individual labour participation and labour activity choices.labour activity choices.

Agricultural, migration and human capital Agricultural, migration and human capital assets have a differential impact across assets have a differential impact across livelihood choices, which varies by gender and livelihood choices, which varies by gender and age.age.

For men the disincentive to labour participation For men the disincentive to labour participation is due to the wait-for-the-next-migration effect; is due to the wait-for-the-next-migration effect; for women it is linked to an income effect -via for women it is linked to an income effect -via remittances- and/or a reallocation of time and remittances- and/or a reallocation of time and occupations (at the household level). occupations (at the household level).

Policy implicationsPolicy implications Migration is crucial for the economic future Migration is crucial for the economic future

of Albania, both in terms of financing of Albania, both in terms of financing economic development (as informal safety economic development (as informal safety net), and in reducing excess labour supply net), and in reducing excess labour supply and poverty. and poverty.

Agriculture appears to be more of a Agriculture appears to be more of a survival strategy than part of a poverty exit survival strategy than part of a poverty exit strategy.strategy.

Education may play a role in encouraging Education may play a role in encouraging diversification out of agriculture, and in diversification out of agriculture, and in Albania this means promoting a relatively Albania this means promoting a relatively higher level of education, beyond the high higher level of education, beyond the high school level.school level.

Policy implications ...cont’dPolicy implications ...cont’d

Agriculture and migration may be Agriculture and migration may be complements, if migration can help easing complements, if migration can help easing liquidity constraints or dealing with risk in liquidity constraints or dealing with risk in some kinds of business at home.some kinds of business at home.

What future migration will be for household What future migration will be for household livelihood strategies is crucial for designing livelihood strategies is crucial for designing policies more effective in stimulating growth policies more effective in stimulating growth and reducing poverty. and reducing poverty.

Future research is needed to detangle the Future research is needed to detangle the direction of causality between migration and direction of causality between migration and poverty.poverty.

Grazie!Grazie!